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The obesity drug market took a break for a decade as the Food and Drug Administration did not approve any drug in this category. However, last year we saw the FDA change stance and give approval to two obesity drugs -- Belviq by Arena Pharmaceuticals (NASDAQ: ARNA  ) and Qsymia by VIVUS  (NASDAQ: VVUS  ) . Both of these drugs have entered the market and received mixed responses from both patients and doctors.

The third player in the sector is Orexigen (NASDAQ: OREX  ) , which is largely ignored due to the fanfare received by the other two companies. Orexigen will prove to be a strong player in the obesity segment as the company plans to launch its drug, Contrave, by early 2015.

Focused pipeline
Orexigen is completely focused on the obesity space. The company has completed clinical trials for Contrave and recently submitted marketing authorization application to the European Medicine Agency. If the application is successful and the review process is complete in the second half of 2014, the company plans to market the drug in early 2015.

Orexigen is evaluating Contrave in the Light Study, a cardiovascular outcomes trial to rule out excess cardiovascular risk in overweight and obese patients receiving Contrave. The company plans to resubmit the Contrave New Drug Application to the FDA by the end of the year.

The second drug in the pipeline is Empatic, another weight loss drug candidate. The company has completed phase 2 trials for the drug and is currently in communication with the FDA to start phase 3 trials. The results of the phase 2 were impressive; patients who took a 24-week therapy lost 9.9% of their baseline body weight. Furthermore, 82.6% of these patients lost at least 5% of their baseline body weight and 47.7% of the patients lost at least 10% of their baseline body weight.

In comparison, Arena and VIVUS have diversified pipelines. VIVUS has another drug approved for erectile dysfunction, Stendra (known as Spedra in the EU), which the company has recently signed an agreement with Menarini of Italy to market. Similarly, Arena is also working on drugs for different diseases. The most advanced of these drugs is APD811, a drug candidate for the treatment of pulmonary arterial hypertension. While these drugs provide diversification to VIVUS and Arena, I believe that Orexigen's expertise and focus on the obesity segment will provide the company with an edge over its peers.

How are obesity drugs doing?
The response to these obesity drugs is mixed at the moment. VIVUS seems to be stuck with regards to the Qsymia sales. In the beginning, the company had very strict labeling and marketing restrictions; after the company received approval to sell the drug through pharmacies, however, sales have picked up. Belviq has been on the market for more than three months now, and the drug has seen slow growth in sales.

There are two main reasons for the slow sales: insurance coverage and consumer acceptance. The insurance coverage for these drugs is very low, and out-of-pocket costs are very high. As a result, sales of these drugs have been severely affected. The companies are trying to tackle this issue by giving free trials and hoping that the results of the drug will persuade the customers to continue the treatment. Both analysts and the companies expected consumers to flock to get these drugs, but that has not been the case. Better marketing strategies may help to solve this issue.

Orexigen can gain an advantage here -- due its late entry, the company has seen the response to both the drugs. This will allow the company to tailor its marketing strategy accordingly. Orexigen still holds the rights for Europe and the rest of the world, and the company is looking for partners to market the drug in these areas. Commercial rights for North America have been sold to Takeda Pharmaceuticals.

Bottom line
As I said above, Orexigen has an advantage due to its focused pipeline. Its expertise in the obesity segment will allow the company to maximize the potential of the drug. In addition, Orexigen's late entry has allowed it to devise a better marketing strategy. Orexigen will have the benefit of learning from other's mistakes. There is certainly huge potential in the obesity market, and the FDA's willingness to fight the disease bodes well for these companies. The overall market is big enough to accommodate all three of these players, and I believe Orexigen will be a major player in this segment.

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Read/Post Comments (6) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2013, at 10:30 AM, RSRdriver wrote:

    Answer- YES! Cramer, thanks for the dip!

  • Report this Comment On October 08, 2013, at 10:34 AM, marpieslice09 wrote:

    yes orex is a great winner as the huge selloff shows. at least 2 years away from probable fda rejection. by that time

    belviq will be more popular then lipitor and viagra combined.

  • Report this Comment On October 08, 2013, at 10:40 AM, marpieslice09 wrote:

    dip[? crash is more like it..stay long fda in 2 years maybe

  • Report this Comment On October 08, 2013, at 10:45 AM, AreaRich wrote:

    Contrave is nothing new just another copycat generic and is not even approved yet. It offers nothing new that hasn't already been on the market and meanwhile obesity numbers continue to grow. Belviq offers something never before seen and hence hope for a new strategy to fight this terrible disease. According to Einstein the definition of insanity is to try the same thing over, and over again and expect different results.

  • Report this Comment On October 08, 2013, at 11:16 AM, i5par wrote:

    OREX offers nothing new to the obesity fight. With sales of Qysmia and Belviq so weak the business model for Contrave makes no sense.

    OREX squeaked by with an 11-8 vote last time. This time without the conclusive study of 10,000 patients I'm afraid approval is iffy at best. A rejection would send he shares plummeting to under a dollar. By the way if OREX had as many shares as Arena the stock would be trading for $2.35.

    Ive decided to go long at ARNA while the shares trade for 60% under.

  • Report this Comment On October 08, 2013, at 12:20 PM, marpieslice09 wrote:

    a buck is too high. this 'company' doesbt have any cash. arna i beleive is sitting on 180 MILLION WITH 1,2 BILLION coming in milestones from EISAI'


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